Commentary and analysis on markets, personal finance, and wealth building from a contrarian perspective. "I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart."
— Charlie Munger

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Saturday, March 7, 2015

Weekly Energy News

Rig count continues to fall:U.S. energy explorers shut rigs targeting oil for the 13th straight week, extending the biggest retrenchment in drilling on record and dragging the total count to the lowest level since 2011.(skip)Contract drillers including Pioneer Energy Services Corp. are laying down rigs. The San Antonio-based company said on Wednesday that it has received notices from clients terminating agreements early for 12 rigs in North Dakota’s Bakken shale formation, the Eagle Ford play in Texas and the Permian Basin of Texas and New Mexico.“U.S. companies have decreased their 2015 spending levels by 29 percent,” Evercore ISI analysts including James West said in a research note March 2. “The key takeaway from this report is U.S. production is poised to flatten and likely fall by year end.”Uranium up 10% over the last month:Major accidents at Rio Tinto's Rössing uranium mine in Namibia and BHP Billiton's Olympic Dam in Australia have removed 8% of the global uranium supply. In the last 30 days, spot price of uranium has increase 10% to $38.75.The falling rig count will eventually cut into supply growth. It will take a while but the cure for low prices is always low prices.I think one thing that people are missing is that just about every country around the world is cutting interest rates. I expect this stimulus to filter through eventually to the underlying economies and I think oil demand will surprise on the upside. This coupled with reigning in of investment in new production will lead to a bigger rise in oil prices than most are expecting. To take advantage of this you have to have conviction that the oil price will react as it always has when supply is constrained and demand increases. The price will go up. However the share prices of oil companies will move far in advance of this as speculators and investors anticipate the oil price rise.